Foreign Investors in the Australian Market

Paul Wrigley from Ray White Toronto agrees with this article on Foreign Investors and Chinese Investors. The media and general public generally think that the Real Estate market is being propped up by Chinese and foreign buyers.

“Australian Property, High on the List for Asian Investors” – Paul Kounnas

What is the extent and the impact of foreign buyers on our housing market? Is it over-stated?

As Australian house prices continue to rise, a key question is being asked; are Chinese buyers influencing the property market and if so, to what extent?
It is well documented that Australia’s property market is attracting significant interest from wealthy foreign buyers. In fact, Australia is one of the highest ranked investment destinations for Asians.

International property investment research conducted for HSBC found that Australia is the number one destination for Indonesians, while it was a close second for Malaysians and Singaporeans. Australia also ranked high among investors from China, with Chinese buyers investing more in the Australian property market than any other nation. Until the recent decline of the US economy, Americans were the largest foreign buyers of Australian property.

Let’s look at some more facts:

The Foreign Investment Review Board (FIRB) regulations restrict foreign purchases of established properties. Foreign investors are only allowed to buy new dwellings or off the plan properties. The idea behind restricting foreigners to buying only new properties is that they’re adding to the housing supply, which helps our economy by creating jobs in the construction industry and other related areas like retail. The FIRB restriction is designed to ease the housing shortage, by encouraging more construction, while reducing competition for established houses.

The value of all foreign purchases in Australia in 2012/2013, not just Chinese purchases, was less than 6% of the total value of residential property sales. As a percentage of the total real estate market, this is quite small.

However, according to a number of commentators, prices are rising strongly because Chinese buyers are buying our homes. The reference is to Chinese nationals, but I suspect most of the Chinese they are referring to are Australians of Asian appearance or of Chinese heritage.

As the article outlines the number of Chinese buyers and Foreign Investors is not as high as everyone thinks. Maybe in capital cities like Sydney & Melbourne but certainly not in Regional areas like Lake Macquarie. The buyers for Lake Macquarie, mainly suburbs like Toronto, Rathmines, Wangi Wangi and surrounding suburbs are coming from: Sydney 10%, Newcastle (within half hr from Toronto) 30%, Out West 5% and Local 55%.